Guide to Qualified Residential Mortgages and Risk Retention

The team of six federal regulators charged with creating a qualified residential mortgage standard that would serve in lieu of securities risk retention has taken a much appreciated turn with the re-proposal issued in August 2013.  In the most likely scenario, QRM standards would exactly match those for qualified mortgages. Unlike in earlier proposals, there would be no requirements to judge credit history or establish loss mitigation procedures and QRMs would encompass more than just first liens. An alternate proposed standard, reportedly less favored by the regulators, would mandate a 30 percent downpayment and credit-history verifications.

While the QRM=QM proposal would ease regulatory burden by giving lenders only one target to aim at, some suggest it may eliminate secondary marketing options for non-QM loans. The new proposal also presents the possibility that correspondent lenders could be required to take on the risk retention of loans they provide.

Learn about the QRM proposal and all its ramifications in the IMF Guide to Qualified Residential Mortgages and Risk Retention. In addition to an understanding of what standards the two proposals would require of loans in order for them to be deemed QRMs, you’ll also learn how the QRM designation affects post-origination actions and how others in the mortgage industry think the proposals will change the market.

Contents include:

  • Points and Fees

  • Market for Non-QRMs

  • Risk-Retention Options for Non-QRMs

  • Horizontal Risk Retention

  • Capital Requirements for Non-QRMs

  • Hedging and Transfer Restrictions

  • Correspondent Lenders and Risk Retention

  • Assignee Liability

  • Mixing QRMs and Non-QRMs in MBS

  • Impact on Availability of Credit

  • Impact on Jumbo MBS Market

  • Securitization of Seasoned Mortgages

  • Representations and Warranties

  • Mortgage Insurance

  • Comments from Lenders

  • Comments from MBS Participants

  • Concerns Raised by the CFPB

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With originations expected to drop in 2018, will your shop turn to non-QM/non-prime mortgage products as a way to bolster volumes?

Yes, definitely. We’re planning a launch.
No. It’s still difficult compliance/regulatory-wise.
Maybe. It’s under consideration.
Not now. But things could change as 2018 progresses.

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